Yield-Curve Modeling

Happy New Year to all!Riccardo Rebonato's Bond Pricing and Yield-Curve Modeling: A Structural Approach will soon appear from Cambridge University Press. It's very well done -- a fine blend of theory, empirics, market sense, and good prose. And not least, endearing humility, well-captured by a memorable sentence from the acknowledgements: "My eight-year-old son has forgiven me, I hope, for not playing with him as much as I would have otherwise; perhaps he has been so understanding because he has had a chance to build a few thousand paper planes with the earlier drafts of this book."TOC below. Pre-order here. Contents

Acknowledgements page ixSymbols and Abbreviations xi

Part I The Foundations1 What This Book Is About 32 Definitions, Notation and a Few Mathematical Results 243 Links among Models, Monetary Policy and the Macroeconomy 494 Bonds: Their Risks and Their Compensations 635 The Risk Factors in Action 816 Principal Components: Theory 987 Principal Components: Empirical Results 108

Part II The Building Blocks: A First Look8 Expectations 1379 Convexity: A First Look 14710 A Preview: A First Look at the Vasicek Model 160

Part III The Conditions of No-Arbitrage11 No-Arbitrage in Discrete Time 18512 No-Arbitrage in Continuous Time 19613 No-Arbitrage with State Price Deflators 20614 No-Arbitrage Conditions for Real Bonds 22415 The Links with an Economics-Based Description of Rates 241

Part IV Solving the Models16 Solving Affine Models: The Vasicek Case 26317 First Extensions 28518 A General Pricing Framework 29919 The Shadow Rate: Dealing with a Near-Zero Lower Bound 329

Part V The Value of Convexity20 The Value of Convexity 35121 A Model-Independent Approach to Valuing Convexity 37122 Convexity: Empirical Results 391